Government benchmark bond yields inched up higher than the previous week with the benchmark 10-year yield closed at 6.8 per cent. The yield was 6.7 per cent last week.
Indian government bond yields increased slightly, following a rise in US yields. This week, the Indian government announced it will buy back bonds worth Rs 250 billion. This buyback aims to stabilize the benchmark 10-year bond yield, to keep it in the range of 6.76 per cent and 6.80 per cent. This is the second buyback in two weeks, showing the government's strong financial position and its goal to improve market liquidity.
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Treasury And Bond Yields
The indicative yield for T-bills currently stands at 6.45 per cent, 6.54 per cent, and 6.54 per cent for three-month, six-month, and 364-day durations, respectively. In the 1-2 year tenure, 5.63% GS 2026 indicates a yield of 6.63 per cent.
Moving on to longer tenures, 7.04% GS 2029 (4-5 year tenure) and the 7.10% GS 2034 (9-10 year range) show indicative yields of 6.80 and 6.85 per cent respectively.
Bond Market Outlook
Currently, the bond market is facing a supply shortage due to government debt buybacks and lower borrowing. Despite this, demand for Indian bonds has increased. This surge is due in part to their recent addition to global debt indexes. The Reserve Bank of India (RBI) also stopped selling bonds in the secondary market last week for the first time since July, worsening the supply problem.
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Indian bonds now among Asia's top performers continue to attract more foreign investment due to their inclusion in global indexes. FTSE Russell on October 9, 2024, announced that it will add Indian government bonds to the FTSE Emerging Markets Government Bond Index starting in September 2025, expected to increase foreign inflows. Analysts suggest that the RBI's shift to a neutral monetary policy might lead to interest rate cuts, further boosting demand for government bonds. Interest rate futures indicate a 25 basis point rate cut by the Fed in November, with a 90 per cent probability, and anticipate 43 basis points of cuts in 2024.
